Question

The following information pertains to Travis Concrete: Sales revenue $ 1,500,000 Gross margin 600,000 Income 90,000 Invested capital 450,000 The company's imputed interest rate is 8%. The capital turnover is:

Answer 1

The capital turnover is: 3.33

Step-by-step explanation:

The capital turnover ratio is also referred to annual sales of a business to the total amount of its stockholders' equity. It indicates a company's effectiveness in using its capital to generate revenue.

The capital turnover ratio is calculated by the following formula:

The capital turnover = Net Annual Sales /Average amount of working capital

In where:

Average amount of working capital = Current assets - Current abilities

In Travis Concrete:

The capital turnover = Sales revenue/Invested capital = $1,500,000/$450,000 = 3.33